This was a great writeup with lots of great information. One thing that bugged me though was the "When to Raise Money" section. It says, in part: "However, for most it will require an idea, a product, and some amount of customer adoption, a.k.a. traction."

There was a great comment on HN a while back (I wish I remembered who said it) that said, "If you're asking about traction or revenue, you aren't making a seed investment".

Andy Bechtolsheim was a seed investor in Google -- he gave them a check based solely on their idea and who they were. Paul Graham/YC made a seed investment in reddit and Justin.tv and whole host of other companies -- none of them existed as more than idea when YC invested.

But VCs are risk averse people (ironic given they are in the risk business), so it makes sense that they would rather invest after a company can show a little traction, especially now that it's so easy to get that initial traction.

I just think we need a new term besides "seed" to differentiate it from the true seed investments.

This Guide has a step baked in, which is move to Silicon Valley. I know this because it's the most important step, and geography plays such a defining role that I expected the guide to talk about it. I didn't see any mention of this. Then I searched the document for "geography" (0 hits) and then "silicon valley" which had 3 hits, in the two snippets below:

>A rule of thumb is that an engineer (the most common early employee for Silicon Valley startups) costs all-in about $15k per month. So, if you would like to be funded for 18 months of operations with an average of five engineers, then you will need about 15k518 = $1.35mm.

and

>Most seed rounds, at least in Silicon Valley, are now structured as either convertible debt or simple agreements for future equity (safes). 17 Some early rounds are still done with equity, but in Silicon Valley they are now the exception.

As you can see, this means the entire guide is written from the point of view of Silicon Valley. It still calls raising a seed round "brutal" and "long, arduous, complex, and ego deflating."

But it is, at least, possible. For the vast majority of the cases they are talking about, after the long, arduous, complex, and ego deflating process, outside silicon valley there is still no seed round that has been put together.

So, if you are reading this guide outside of silicon valley, please realize is that your first step toward having a crack at this arduous process, is to move to SV. Airbnb, based in San Francisco, still had these 7 famous rejections for its modest seed round: https://medium.com/@bchesky/7-rejections-7d894cbaa084

There's not a chance in hell it would have been funded on that model at all basically anywhere else in the world. Do what it takes: if your business needs a seed round, you owe it to your business to move to silicon valley.

This is fantastic. I am more and more impressed with the wealth of knowledge being shared by YC, especially regarding clarifying common financial vocabulary (which is often used to make people believe that finance is difficult as the terminology used in discussing finance is designed to sound more complicated than it is).

Similar to how clear and concise the SAFE documents are, this is really nice to read.

These rules are nowhere near as complex as combat rules in AD&D and yet I find my eyes glaze over when reading even clearly well-written summaries. I think the problem is actually that these are actually "combat rules", but they are never explained as such. The combat is between the investor and the investee, in that the investor wants as much as possible for his money under every circumstance, and the investee wants to give as little as possible in every circumstance. Certain important moments and thresholds have become "standard circumstances" over time, and these are basically used to divvy up the battle into bite-sized pieces.

Imagine a variant of D&D where every encounter begins with you and your party naked, and after assessing your enemy you have to negotiate with Elves for your armor and weapons - to be paid for after either winning the battle. (If you lose, you might have to give back your battered armor, and try a different group of Elves). In the best case, if you beat the final Boss (which is always the same, the Grand Vizier of Product Market Fit) then you get to keep like 10% of the treasure and the Elves get 90%.

(You could grind lower level monsters to buy your own armor, but that can take a very long time and it might wear you down until you're no longer fit to be a warrior anymore. The Elves are smart because they risk money (which is replaceable) but not life (which is not).)

Seed fundraising is so confusing, especially for first-time founders. Everyone seems to have a different opinion and you can never be sure about people's bias or motives. I appreciate YC leveling the playing field with straightforward founder-friendly information.

If you hear an angel/VC saying they're interested in investing in you but they haven't done so within a couple of meetings, politely walk away.

When you're in the seed stage, angels are investing in you and the idea. Some will want to know about traction MRR (walk away)and others will want to do deep-dives of your concept (again, walk away).

> The difference between an angel and a VC is that angels are amateurs and VCs are pros. VCs invest other people’s money and angels invest their own on their own terms. Although some angels are quite rigorous and act very much like the pros, for the most part they are much more like hobbyists.

That's a pretty broad statement I would take issue with calling angels as a group, amateurs and hobbyists. Especially since some well know VC's also do angle investing.

So much incredible information in this document. I think the misstep some Founders make is trying to raise too early. I hear stories all the time about people trying to raise on an idea. And while that can be useful, it is usually the wrong time to go after Investors.

We made this mistake and failed miserably. It was only after we had a beta, some customers, and some press that people started to pay attention. Now we're close to closing our seed round and it's because we had better focus around what we were doing, how we were going to do it, and why it was important.

At the end of the day, a VC is interested in answering one question, "What's the 10x return?" How will you make them lots of money. Unless the pieces are all there to answer that question, Founders will get a lot of no's. The goal should be to go through your pitch deck and find ways to eliminate the ability for VCs/Angels/Investors to say "no."

How rapid is interesting? This depends, but a rate of 10% per week for several weeks is impressive.

I wish this was a bit more specific -- how long exactly is "several weeks"? 3 weeks (total growth of 33%)? 7 weeks (total growth of 95%)? 13 weeks (total growth of x3.45)? 52 weeks (total growth of x142)?

I've been reading "Angels, Dragons & Vultures" recently to learn about this stuff. I highly recommend it.

This is exciting. I've always tried to imagine and wonder what the process would be like. I've never seen a detailed document like this.

Great job~

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